Investment Clubs: The vital how-to’s

Marketplace Staff May 4, 2007
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Investment Clubs: The vital how-to’s

Marketplace Staff May 4, 2007
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TESS VIGELAND: For the next few weeks, we’ll be hanging out with three investment clubs. We’re following their progress all this year. And at the first installment in the series, we got lots of questions from you. But what you really wanted to know was, how do I join or start a club? So we asked San Jose club members Kathy Tegtmeier, Marvin Kohn and Martha Alderson for some advice.

KATHY TEGTMEIER:
Everyone thinks they want to join an already seasoned veteran club, and come in and – absorb the knowledge. And where you really get the value, I think, is by starting with other people who know just as little as you do, and coming up through the ranks together.

MARVIN KOHN: Doing it together.

TEGTMEIER:
And educating as a group.

MARTHA ALDERSON: There are clubs that try to be virtual clubs, where no money is actually changing hands. And I think that they often have trouble with people losing interest and not paying attention. But – it’s how much money you can – A, afford, but, also, you know, skin in the game.

VIGELAND: But what about the basics, such as how do you decide what you’re gonna charge per month? How do you decide if there is a membership fee? Who takes what stock to follow?

KOHN: Actually, all of those questions are really interesting and real easy. First of all, I must suggest that you contact Better Investing. They have, among other things, a draft copy of a partnership agreement because – an investment club legally has to be an entity. And – the best entity for is a partnership because of a tax structure. Among other things, BI has a listing in their magazine, which shows all of the local chapters. Contact your chapter representative. And the amount of money you wanna put in, for example, depends upon the group.

VIGELAND: All right. Kathy?

TEGTMEIER: Yes. The typical club will collect dues monthly. And the dues will be somewhere between, maybe $25 and $100. But you want enough money that you can actually invest in stocks and buy stocks. Because as soon as you have money on the line, you’ll pay more attention.

VIGELAND:
What about when you get to, say, it’s time to sell a stock. Is there, I don’t know, a computer program that will tell you how much that takes out from every individual in the club? Or – say, when somebody leaves the club, how much they get of the pot, Miss Kathy.

TEGTMEIER:
There are software programs that you can buy or gain access to with a fee – an annual fee – that do the calculations, the arithmetic for you.

VIGELAND:
Can you recommend a program?

TEGTMEIER:
I can recommend two different companies that provide them. One is called Bivio. The other company has two different programs that you can buy. And the company’s name is iClub. And I can highly recommend either one of those companies as providing really good reliable software. The other thing that, when I was listing things the club needs to do as it forms, once you’ve actually decided, yes, you wanna become an – investment club, one of the very first things you should have someone do is contact the IRS and fill out an SS-4 form. And that’s a tax ID form.

VIGELAND:
But – you can be a beginner? You can start out knowing nothing about the stock market?

TEGTMEIER:
All of us started out knowing nothing, as rank beginner, newbie, didn’t-know-diddly stock investors.

KOHN: By the way, I started out back in 1968 knowing nothing.

VIGELAND:
And now, they know a lot. And you can find a link to better investing on our Web site. Later in the show, we’ll catch up with the San Jose club and see how their investments fared since January. This is Marketplace Money from American Public Media.

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